Government Policy and Investment Decisions In many examples over the years, we have seen Government policy decisions which in the short term result in some pretty good investment returns but over time they prove to be bad decisions as far as investors are concerned.
I am going to talk in generalities here because there are simply too many examples from the past. So I will talk about what to do do and how to interpret what is going down and more importantly the implications.
So when Governments go hard on a certain course of action, you need to ask yourself as investors, the following question - "Why are they doing this?"
More importantly you need to ask yourself the question - "What problem are they trying to fix and if there is a problem they are trying to fix is...it it real?.... and if so what should I do about it in terms of my asset allocation?" From decades of being "in the business", if you get this right you will make lots of money, if not....well... How do you you "get it right?"....anticipate that Governments will screw it up and invest in companies with the solutions to the problems Governments will create.
Sooo..again...in generalities..
Most Governments in the world are engaged in deficit financing. In simple terms they are goosing the economy at the expense of future generations. This additional stimulus is resulting in record stock market valuations. So in some sense this prosperity is not sustainable (at some point deficits become a problem). You need to ask yourself the question..."If it wasn't for the stimulus, what would be the numbers?" "Where will I be when they have to stop?"
How long this will last is anybody's guess. But for those of you here who are much younger than me, this is clearly something to be wary of and keep track of.
The other theme which I have talked about before is the trend in Western Governments to use crisis (eg COVID and Climate Change) to institute Marxist policies and not let the natural business ecosystem figure things out. History has shown that Marxism doesn't work except for certain people and that it is a fraud. The end result is not a good story for investors except for a few people.